The best time to assign an account to a collection agency is when the debt is right around 90 days past due.
- You have given your debtor at least three billing cycles to pay the bill and resolve any billing disputes that may have occurred.
- At 90 days your own efforts have been pretty much exhausted, and the account is clearly in the default territory. Your own staff is spending more time and energy on newer accounts that are around 30-60 days past due.
- Paying your bill is clearly not a priority in your debtor’s mind by now. ( or your patient’s mind, in case of medical debts). Chances of recovering money are dropping every day. A collection agency will typically recover 75% of your money when the account is assigned at 90 days.
- Your internal staff is no match with a debt collector’s persistence and collection tactics. Your accounting department is unaware of collection laws that keep changing all the time.
- You can write off collection costs as business expenses in your taxes.
- Most likely your debtor likely has several other unpaid bills too, a debt collector ensures that your bill becomes their top priority. You want to get paid before he wracks up more unpaid bills.
- By assigning an account at 90 days to a collection agency, you will likely not alienate the debtor. He understands that you have given them enough time already.
- Your collection costs are lower: You still have enough time to send Fixed-fee collection letters that cost a lot less than Contingency-based services. By spending about $15-$20 per account, you have an excellent chance to recover your money. Collection demands sent by a professional debt collector are a huge concern for your debtor versus when you are trying to collect by yourself. They will dig in all resources to get a collection agency off their back.
It is better to recover 75% of your money rather than taking a 100% loss.
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